Ophiopogon japonicus is a traditional Chinese medicine that might be effective for treating type 2 diabetes. Recent research confirmed that MDG-1, a polysaccharide from O. japonicas, activates the PI3K/Akt signaling pathway and improves insulin sensitivity in a diabetic KKA^y mouse model, but little is known about its effects on diabetic nephropathy. In this study, KKA^y mice were orally administered distilled water (control group), MDG-1, or rosiglitazone for 12 weeks. Blood glucose levels were tested every two weeks for the fed mice. At 6 and 12 weeks, blood samples were collected for biochemical examination. At the end of the experiment, all kidney tissues were collected for histological examination and western blot analysis. Results show that MDG-1 (300 mg/kg) significantly decreased the levels of blood glucose, triglycerides, blood urine nitrogen and albumin, and significantly inhibited the expression of transforming growth factor-beta 1 and connective tissue growth factor. Moreover, MDG-1 could alleviate glomerular mesangial expansion and tubulointerstitial fibrosis in the diabetic mice, as confirmed by histopathological examination. These data indicated that MDG-1 ameliorates renal disease in diabetic mice by reducing hyperglycemia, hyperinsulinemia, and hyperlipidemia, and by inhibiting intracellular signaling pathways.